Dave Hughes isn’t an economist, but he doesn’t need to be to see what’s going on. The comedian says the government treats our money like they found it in a sack by the river. The OECD and Deloitte, minus the jokes, are saying exactly the same thing.
The latest economic report card on Australia has been released by the OECD, and it says that many of our countrymen and women would be reading the Paris-based thinktank’s findings and doing a Dave Hughes, saying: Not happy, Albo and Jim. Not happy!
Bluntly, as the AFR’s Michael Read tells us: “Australians have experienced one of the sharpest declines in living standards in the developed world since the pandemic.”
And it gets worse, as he adds that “the OECD warns real wages are set to fall even further this year as high inflation erodes workers’ incomes.”
This is not great reading, given yesterday Deloitte Access Economics told us that we were “facing its longest stretch of weak economic growth since the early 1990s recession”.
Neither of these revelations strengthens Treasurer Jim Chalmers’ claim to be a strong economic manager.
Let’s look at the guts of these views from these two objective economic bodies:
- Inflation since March 2021 has cut real wages, that is what they buy, by 5.1%.
- The average OECD country saw a 5% lift in real wages or living standards.
- Only 11 out of the 38 member countries of the OECD saw the real minimum wage fall over 2025-26 and Australia was one of them.
- Both Australia and New Zealand living standards are “still close to their post-pandemic lows, the OECD found”.
- And the OECD thinks this story worsens because of the Iran war’s impact on inflation via petrol prices and other related cost increases.
Responding to this bad economic report card, this is what the Treasurer told us: “Under Labor, Australia has the lowest average unemployment of any government in half a century, smaller deficits and less debt than the Coalition left us, booming business investment, with tax cuts and higher wages that the right-wing parties oppose.”
To be fair, Jim is right on Labor’s unemployment record but there has been a price of higher inflation, high interest rates and as the OECD says the wages might be higher in dollar terms but they buy less.
The smaller budget deficits are only compared to big deficits created by the pandemic lockdowns.
Budget deficits and surpluses
This chart from Trading Economics actually shows deficits are getting bigger, with the really big ones created during the Covid era, when all governments had to spend to save us falling into another Great Depression.
Jim and Albo get an A for the unemployment result but get Fs for the subjects of Inflation, Interest Rates and Real Wages, which explains the poor living standards report from the OECD.
Like all students who are underperforming, they need guidance on how to improve and Deloitte Access Economics economist Stephen Smith explained what’s needed.
“For too long, strong population growth has masked a weak underlying productivity performance and lifted aggregate growth while doing less to improve living standards,” Smith told the AFR.
Right now, many economists agree with Smith, who’s tipping a period of the slowest economic growth since the 1990s recession period.
Ultimately, Chalmers might have the last laugh over economists, but he will have to see inflation and interest rates fall without unemployment rising significantly, but that’s easier said than done.
But there is another view.
As comedian-turned-economics commentator, Dave Hughes, said on Nine’s Today show to Karl Stefanovic and Sarah Abo after the surprise Budget tax changes: “The people who are in charge of our country are idiots, and they treat our money like they found it in a sack by the river and they have to spend it before someone finds out”.
That is a colourful way to describe an economy, which he thinks is “going through the floor” because of the Government’s policies.
Jim and Albo have less than two years until the next election to prove Dave and other critics and economists right or wrong. As an Australian business owner and financial advisor, I want a strong economy and solid stock market, so I hope Dave’s wrong, but I wouldn’t put money on it.
